With an average vehicle price of over $35,000 and stagnant incomes, even lower interest rates still aren’t enough to allow people to purchase a new car.
Car Prices Are Rising, While Incomes Aren’t
In the second quarter of 2019, the average price for a new car was around $35,000 while the average car loan was around $32,119. The new cars and trucks of today cost nearly 38 percent more than they did just 10 years ago. Even some prices for SUVs and trucks are closer to 60 or 70 percent higher than in 2009. While the price of a car was rapidly increasing, household incomes weren’t. The average income in 2009 was around $59,000 and only jumped to $62,000 in 2018, which isn’t anywhere close to a 60, 70 or even 38 percent increase.
Monthly Payments Have Become Too High
It has been determined that a reasonable amount to spend on a vehicle is 10 to 15 percent of the monthly income you earn. For a middle-class shopper (around a $52,187 income) looking to buy a new car, a monthly payment around $400 would be deemed acceptable. But according to some auto-loan calculators, it suggests that you get a payment of $400 a month at a 4 percent interest, which means that that car loan would last for 84 months or seven years.
All of this still doesn’t mean that all new cars are out of range for a middle-class family. Check out my post of the Best Cars Under $16,000 because it offers several cheap cars that most families of today can afford upfront of via a cheap car loan. But also keep in mind that you don’t have to buy a new car, used cars are also a really great option as well. Each and every year, the average age of vehicles in the United States keeps going up, meaning that cars are lasting longer. Over the past several years, the number of new vehicles sold in the U.S. have remained steady at about 17 million annually, so expect there to be plenty of used cars available on the market to purchase.
Weekly Motor Talk 